EU credibility on tax avoidance undermined: MEPs

(BRUSSELS) - Leading MEPs hit out at EU finance ministers Thursday for removing eight countries from the EU's blacklist of tax havens, saying it will hamper the fight against tax evasion and avoidance.

Large sums of money are lost every year due to tax evasion and avoidance. In the EU alone this is estimated to be EUR 1 trillion, according to some estimates.

The Parliament believes governments could use this money to support health, education and other social services but instead it is funnelled to tax havens around the world. Across Europe 1.5 million jobs could have been supported with the money that was lost to national authorities because of the tax losses revealed in the Panama Papers.

In the wake of the Panama Papers revelations, MEPs set up an inquiry committee to investigate what measures should be taken to tackle tax evasion and avoidance and one of its key recommendations was the establishment of a blacklist of tax havens.

Despite this, EU finance ministers decided on 23 January to remove eight countries from the tax-haven blacklist because they committed to addressing EU concerns. These countries include Panama, Barbados, Grenada, South Korea, Macao, Mongolia, Tunisia and the United Arab Emirates.

This move has been criticised by leading MEPs involved in the fight against tax evasion and avoidance. German EPP member Werner Langen, former chair of the special inquiry committee, said: "The Council's decision [...] is inappropriate. The Council should not decide based on non-binding letters and assurances, but only on facts, which states should be removed from the list and finally consider which EU member states should be added to the list."

Langen added: "The current legislation allows certain member states to use legal tax avoidance as a business model to support their own economy. These practices have to stop in order to ensure a fair tax competition between the member states."

Portuguese S&D member Ana Gomes, former vice-chair of the committee, was equally critical: "I believe that the decision undermines the EU's credibility, which was never very convincing in the first place, since some of the biggest tax havens in the world are EU member states, which constantly block any attempts for significant internal reform."

In its latest report on inequality, UK charity Oxfam said the super-rich should pay more taxes and called for a crackdown on tax havens. To achieve this, Oxfam said it would be necessary to adopt an objective blacklist of the worst tax havens and implement automatic sanctions against the corporations that use them.

Gomes commented: "We understand and see the connection between an unfair tax system and the rising inequality in our societies, the unfair treatment of SMEs and multinational corporations, the race to the bottom among EU member states.

"All this, of course, fuels populism and discredits our governments, political parties and public institutions. Unfortunately, member states' rhetoric in the fight against inequality and tax evasion has yet to be matched by significant action. Reforms proposed by the Commission, and called for and strengthened by this Parliament, are repeatedly watered down in the Council."

As revealed by the Panama and Paradise Papers, it is believed the rich are hiding at least €6 trillion from the tax authorities through a global network of tax havens.

European Parliament briefing: tackling tax avoidance and fighting tax evasion